A major geopolitical shift dominated last week's markets. The Democrats' victory in the US midterm elections fueled expectations of reduced tensions in the Middle East, sending crude oil prices tumbling to record lows. The tech sector took a hit as investors grew concerned about stricter AI oversight. Meanwhile, central banks stuck to their hawkish approach, while gold and other precious metals posted strong gains over the week.
Political shift and the tech sector: Following the Democrats' win and their takeover of both houses of Congress, Big Tech and chipmakers came under pressure. Nvidia slipped into a bear market, falling 5% for the week. Investors are pricing in risks of tighter AI regulation and reduced federal spending.
Labor market and Fed policy rate: The ADP National Employment Report showed private-sector employment rising by 86 000 jobs, while initial jobless claims hit fresh lows. Despite solid data, expectations for a December Federal Reserve rate hike fluctuate around 68–71% amid broader disinflationary pressure from falling oil prices.
US Dollar Index (DXY): The index staged a rebound toward 102 driven by safe-haven demand, but closed the week under pressure due to the prospects of a fiscal stalemate in Washington.
Eurozone annual inflation reached 4.0% in October, matching expectations. European Central Bank officials, including Nagel and Kocher, left the door open for a December rate hike, with markets pricing in a 72% probability. Slowing business activity acted as a drag, with the Composite PMI dropping to 51.7; nevertheless, EUR/USD strengthened to one-month highs on broader greenback weakness.
The Bank of England increased its bank rate from 3.75% to 4.00% for the first time since summer 2023. Meanwhile, robust economic activity, reflected in a Services PMI reading of 52.8, lifted the pound to its highest level in seven weeks.
Japan: Nominal wage growth hit a near-30-year high, fueling speculation about a potential Bank of Japan rate hike in December. USD/JPY slid toward the 157.80 handle amid tightening expectations and safe-haven flows.
New Zealand: The NZD tumbled to its lowest levels since April 2025 ahead of the general election, weighed down by coalition uncertainties and a dovish tone from the Reserve Bank of New Zealand.
DXY: Partially recovered from weekly losses, holding near 101.8–102.0 as demand for safe-haven assets offered support amid the equity selloff.
EUR/USD: Settled in positive territory above key support levels, lifted by ECB rate expectations and pressure on the US dollar.
GBP/USD: Retained upward momentum near 1.3500 following the Bank of England's rate decision.
USD/JPY: Remained under selling pressure near 157.80, weighed down by strong Japanese wage growth data.
AUD/USD: Advanced on improving risk appetite following the US elections and a strong Australian trade surplus.
USD/CAD: Declined for a second consecutive session due to greenback weakness, despite headwinds from falling crude oil prices.
Crude Oil (Brent / WTI): Plunged over 13% for the week (finding support near $98 for Brent and reaching local lows on WTI)—its steepest decline since spring 2020. Hopes for a diplomatic breakthrough in the Middle East and a return to a market surplus prompted traders to aggressively strip out the geopolitical premium.
Gold and silver (XAU/USD, XAG/USD): Precious metals posted a powerful weekly rally (gaining over 4%), capitalizing on falling Treasury yields and record net purchases by global central banks (61 tonnes in September).
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